Do Transit Fares Hurt the Poor?

Abstract:

Using detailed transit card data, we document that many commuters, especially those in low-income neighborhoods, purchase weekly (7-day) unlimited-ride passes repeatedly for long periods of time (at least 6 months) on the New York City public transit system. As a monthly (30-day) pass costs less than an equivalent set of weekly passes, these commuters spend 15 percent ($20) more each month on transit fare than they would have with monthly passes while receiving the same level and quality of transit services. Exploiting fare hikes in March 2013 and March 2015 as natural experiments, we provide evidence of this significant overpayment consistent with these commuters being unable to spend a large amount of money at one time on monthly passes. Alternative mechanisms such as job instability alone are unlikely to explain the observed behaviors of recurring weekly pass commuters. Low-income commuters could benefit significantly from a monthly fare cap, which does not require a lump-sum payment and allows transit riders to travel for free for the rest of the month after they meet the fare equivalent of a monthly pass.

Host or Publisher University of Nebraska Omaha Economics